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OPINIONFuels

Downstream to Upstream: Thanks!

Gasoline price slide continues
Photograph: Shutterstock

CAMARILLO, Calif. — Regular-grade retail gasoline prices dropped an average of 6.45 cents per gallon in the past two weeks to $2.7438, according to the most recent Lundberg Survey of U.S. fuel markets. This comes after prices slipped 2.38 cents during the prior two weeks, for a total decline of 8.83 cents since July 12.

The price cutting has accelerated some and may continue in coming days.

Since mid-July, oil prices have retreated about a nickel more than pump prices did.

And on the U.S. gasoline side, stocks have swelled nicely, and the refining sector has more than 96% of total capacity employed—and this despite the loss of an East Coast refinery.

Refiners passed through to their marketers deeper price cuts than those they received from oil producers, costing them gasoline margin. Yet their gasoline margin remains superior to what it was during most years in the past decade.

Retailers increased margin on gasoline during the same period, putting the national apparent average at a hefty 32.55 cents per gallon on regular grade. Retailers have gained nearly as much gasoline margin in the past four weeks as was lost during the prior five weeks.

Because neither refiner nor retailer gasoline margin are currently narrow on average, they are not acute positive factors in the short-term pump price trend. So absent downstream gasoline margin trouble, prices are more free to follow crude oil price cuts down than they otherwise would be.

The two downstream sectors of the U.S. oil industry are faring well, thanks in part to crude-oil price discounting. Motorists are benefiting from more gasoline at lower prices, and also from the current economic health of their suppliers, including the nation's refiners, marketers and retailers. The U.S. average retail price is now a discount of 18.3 cents per gallon under its year-ago point.

Camarillo, Calif.-based Lundberg Survey Inc. is an independent market research company specializing in the U.S. petroleum marketing and related industries.

Click here for previous Lundberg Survey reports in CSP Daily News.

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